LNP – Sri Lanka is on the road to recovery: Cabraal

Sri Lanka’s economy is gradually but surely on the road to recovery and the country will record a GDP growth of over 5% in 2022, Governor of the Central Bank, Ajith Nivard Cabraal said today.

“The government is in the process of negotiating with India and China to obtain the assistance of the two friendly countries – a super power and a regional power – to facilitate debt repayment of Sri Lanka which is the major issue before us right now,” Cabraal said.

Cabraal said he had rejected outright the requests made by a section of economic pundits, the opposition and corporate sector leaders to default the repayment of US$ 500 million by January 18th and use it to purchase essential commodities like food, fuel and drugs.

“No, I don’t accept the request to default the repayment of International Sovereign Bonds (ISB) worth US$ 500 million. It is not a request made by bona-fide intensions. We have never defaulted a loan obtained from a friendly country, global financial agency or from the bond market. We pay this loan for sure and maintain the investor confidence unscathed. Those who ask us to default loan repayment will be thoroughly disappointed,” Cabraal said.

The tourist sector has shown a steady improvement, exports revenue and foreign remittances in 2021 has increased satisfactorily. I expect a better performance of this three major foreign income generators in 2022 and as such, by the end of this year, Sri Lanka’s economy would be in a very healthy position, he noted.

Commenting on the suggestion that Sri Lanka was facing bankruptcy and not in a position to repay her loans, Cabraal said this canard has been in the social domain since 1977.

“What I cannot understand is that the same people now ask the government to default the ISB repayment of 500 million dollars. Lebanon fell to the same trap a few years ago heeding to the requests made to default loan repayments but Sri Lanka will not be foolish to do the same. When the foreign reserves dropped to little over US$ 1 billion in November, I said we increased foreign reserves to over US$ 3 billion by January 2022,” he noted.

Responding to the issue related to the source of US$ 1.5 billion obtained to strengthen foreign reserves, Cabraal said no bank in the world would disclose the source of income for any bank account as it is unethical to ask it and against the bank secrecy law.

“When you deposit some money in your bank account, do you agree if the bank reveals the information of your account to an outside source?” He quizzed adding that it was surprising to note that no one questioned about the source of foreign reserve income when he increased it to US$ 8 billion soon after he assumed duties as the governor of the CBSL in 2006.

In response to a journalist, Cabraal said the Central Bank uses various tools to manage the economy, and increase foreign reserves prudently with the hope of economic recovery gradually but surely in 2022. By doing so, money printing would be drastically curtailed this year. However, the trade gap resulting from high import cost in excess of low export revenue remains a major drawback to the national economy, he emphasized.

On the issue of recent of gold reserves of Sri Lanka worth US$ 207million, Cbraal said it was a tool used regularly by almost all countries to maintain a healthy foreign reserve stock.